Bailout Bonus Brouhaha: Fannie Mae Edition

Another bonus battle flared up today as a key lawmaker and government-controlled mortgage giant, Fannie Mae, crossed swords over the controversial money awards.

Fannie Mae's chief executive sent employees an e-mail message defending the company's bonus program while Representative Barney Frank, Democrat of Massachusetts, countered with a demand that such bonuses be completely scrapped.

Only a few million dollars are involved in the Fannie Mae bonuses -- the highest single award is just over $600,000. That's a drop in the $165 million bonus bucket that insurance giant A.I.G. doled out to its employees.

Even so, widespread public fury that any bonuses are unjustified windfalls for failure, and the fact that taxpayer money has saved Fannie Mae and its sister company, Freddie Mac, has put most any executive retention bonus front and center for debate.

Herbert Allison -- who took over at Fannie Mae last fall and works without a salary -- proclaimed his view in an e-mail to employees, which was disclosed to the Associated Press. Fannie's spokesman, Brian Faith, did not return calls for comment.

"I am deeply concerned that eliminating our retention plan would jeopardize our ability to fulfill the mission the government has given us to address the housing crisis," he wrote employees.

Noting that Fannie is charged with preventing housing foreclosures, he said the bonuses were needed to "ensure we maintain the skills and experience we need to help keep the mortgage market operating."

Pshaw -- in a word -- said Frank, who chairs the House Financial Services Committee. He wrote Fannie's regulator, the Federal Housing Finance Agency, urging it to rescind the retention bonus programs, bar future bonuses, and recover any bonuses already paid.

"I remain very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea," he wrote in a letter released today.

Plus -- given the troubled economy and job market -- "it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave," he said.

Even so, he may not find a sympathetic hearing from the regulatory agency's head, James Lockhart, who noted publicly this week that following the departure of Fannie's top layer of executives, "it would have been catastrophic to lose the next layers down and other highly experience employees."

Related

Wall Street isn't alone in having a tin ear when it comes to time to reward the same executives who helped push the country into its financial mess.
Government-controlled mortgage giants Fannie Mae and Freddie Mac are paying six-figure bonuses to retain the executives who presided over the loss of more than $100 billion last year alone, according to regulatory filings.

Fannie Mae CEO Michael Williams plans to resign, the government-controlled mortgage giant said Tuesday. Williams, who took over as president and CEO of the troubled company in 2009, will continue as CEO until Fannie Mae's board names a successor. The firm did not provide a specific reason for Williams' departure; in a statement, Williams said only that he had decided that "the time is right to turn over the reins to a new leader." Williams will leave behind a firm still struggling to get its finances in order.

Taxpayers are already on the hook for $180 billion in losses at Fannie Mae and Freddie Mac. That number is going to rise, perhaps significantly.
The clever synonym for more taxpayer losses is "treasury Advance". With that understanding, please consider Fannie Mae's Losses Narrow but Treasury Advance Requested.

It's no wonder that feet dragged when it came to disclosing the specifics of what government-rescued mortgage financers Fannie Mae and Freddie Mac are paying to make sure their employees stick around.
It's $210 million. About a fourth already was paid out last year, and another $159 million will be paid out this year and next, according to a letter from the companies' government regulator, James B. Lockhart, who heads the Office of Federal Housing Enterprise Oversight.

Now that home prices have recovered and homes are not the bargain they were four years ago, it is fitting the parasites once again want to make homes "affordable" to the masses with low-down payment options.Please consider Fannie Mae, Freddie Mac detail plans for 3% down-payment mortgages.

Shares of the government-sponsored enterprises (GSEs), Fannie Mae (OCTCBB:FNMA) and Freddie Mac (OTCBB:FMCC), rallied 12% and 11%, respectively, in trade yesterday. This surge came after Senator Tim Johnson called for the end of the GSEs’ conservatorship.

Fannie Mae (FNMA) and Freddie Mac (FMCC) regulator, Federal Housing Finance Agency (FHFA), has announced a shift in its policies, which may increase mortgage lending. The new policies will help the mortgage giants maintain their position in the housing market, help out distressed homeowners, and stimulate home lending.